Judge Agrees that JCPenney Interfered with Macy’s Deal

New York—In the battle between department store titans Macy’s and JCPenney, Macy’s won once again.

In a ruling issued today by a New York State Supreme Court judge, JCPenney was accused of interfering with Macy’s exclusive deal with Martha Stewart Living Omnimedia by investing in Martha Stewart and doing its own deal for merchandise.

Behavior ‘Less Than Admirable’

However, Justice Jeffrey Oing limited the damages that Macy’s could obtain. While JCPenney might be liable for damages over designs that Martha Stewart Living prepared for JCPenney and sold under a “JCP Everyday” label.

But, Oing said, despite bad behavior by JCPenney’s executives (namely ousted CEO Ron Johnson) Macy’s failed to prove by “clear, unequivocal and convincing evidence” that it was entitled to punitive damages. “The behavior exhibited by JCP’s top executives, with JCP board ratification, has been less than admirable,” the judge said.

Oing went on to note Johnson’s firing and called him “a casualty of his own hubris.”

The judge noted that JPCenney, its board and top executives were “publicly ridiculed and humiliated,” and that the strategy was a “colossal” failure that placed JCPenney on the verge of financial collapse. “These significant facts are a sufficient deterrent to JCP and other companies from acting in a similar way in the future.”

The judge referred the issue of damages to a referee or special hearing officer.

Macy’s sued JCPenney and Martha Stewart Living after the two announced a partnership in December 2011. Macy’s said the agreement breached its contract with Martha Stewart that included exclusive rights to Martha Stewart-branded cookware, bedding and bath products.

In October, Penney and Martha Stewart Living announced a revised agreement that eliminated Stewart’s products in home goods categories to which Macy’s claimed exclusive rights.